Typically, the price at which an assembled product can be sold drops rather quickly over the life time of the product. An assembled product such as a telecommunication base station may comprise many subcomponents. Furthermore, the telecommunication base station may be sold in various configurations to meet customer scaling requirements. Each configuration may include a different quantitative mix of subcomponents. To be competitive in today's global economy and maintain a consistent profit, a business enterprise, which builds and sells the assembled product, needs to manage the costs of these subcomponents.
Many times these subcomponents can be replaced by cheaper subcomponent's due to technology advances, manufacturing efficiency, and the like. Integrating new subcomponents into an assembled product can prove costly depending on the new subcomponents complexity. For example, a new subcomponent may require additional software for it to operate in the assembled product, a new wiring plan to electrically connect the new subcomponent to the assembly, a new packaging plan for the assembled product, and the like.
Since operating budgets of the business enterprise are limited, how does the business enterprise decide which subcomponents should be replaced? Out of the subcomponents chosen to be replace, what goals should be used to determine a reasonable price reduction target? Without any goals, how can allocating development resources between projects defined by each new subcomponent be justified? When would be the best time to introduce an assembled product with one or more new subcomponents to minimize stranded inventory and maximize savings? How does a business enterprise measure the effectiveness of introducing the assembled product with one or more new subcomponents? Conventionally, management teams of the business enterprise introduce an assembled product on an adhoc basis without being able to answer these and other related questions, resulting in wasting time on replacing subcomponents which do not affect the bottom line, increased development costs, and shrinking profits, if any at all, remain after introducing the new subcomponents.